Despite all the predictions for iron ore collapsing in value, the metal has continued to go from strength to strength so far this year.
According to Metal Bulletin the spot price for benchmark 62% fines made its third-straight gain overnight, rising by 0.4% to a new two-year high of US$83.84 a tonne.
This is undoubtedly great news for the miners such as Fortescue Metals Group Limited (ASX: FMG), BHP Billiton Limited (ASX: BHP), and Rio Tinto Limited (ASX: RIO).
But will it last?
Analysts at Ord Minnett seem to think it will. On Tuesday the broker upgraded its iron ore forecast for 2017 from an average of US$60 a tonne to US$73 a tonne according to The Australian.
They believe that prices will hold at current levels until the middle of the year, before ultimately fading in the second half as new supply hits the market.
Because of this it has increased its price target on Fortescue's shares to $7.80 and slapped an accumulate rating on its shares. As Fortescue last closed at $6.36, Ord Minnett's price target indicates a possible return of over 22%.
Should you invest?
Fortescue is easily one of the stand out investments in the resources sector. I have been extremely impressed with the way the miner has reduced its debt and lowered its costs.
If iron ore prices do remain at these levels until mid 2017 then I would have to agree with Ord Minnett that now is a great time to accumulate shares in Fortescue and the rest of the major iron ore producers.
But whether prices actually remain at these levels for much longer is a complete unknown. So for this reason I'm going to sit this one out and focus on other areas of the market.
